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June 30, 2014

On Same-Sex Couples’ Money Matters, Confusion Reigns

Year after DOMA decision, many same-sex married couples don’t talk about money, and many need advice on new laws

Less than a third of same-sex married couples reviewed their financial plans after the wedding.

The movement to legalize same-sex marriage in the U.S. has progressed with remarkable speed in the year since the Supreme Court struck down the Defense of Marriage Act’s denial of federal benefits to lawfully married same-sex couples.

A recent ruling by the Court of Appeals for the 10th Circuit in Denver declared that same-sex couples had a “fundamental right” to marry. That ruling struck down Utah’s ban on same-sex marriage, as did one the same day in Indiana.

Other federal appeals court decisions — not all necessarily pro-same-sex-marriage — are expected this year.

But a year after the DOMA decision, lesbian, gay, bisexual and transgender investors are still struggling to understand changing laws and are concerned about the financial and legal implications involved, according to new research by Wells Fargo.

Eighty-three percent of those surveyed said they did not fully understand how federal and state laws applied, including 67% of respondents who were currently in legal same-sex marriages.

Despite the confusion, just 47% who were in same-sex marriages or partnerships had sought guidance to help them figure out how recent court rulings and laws affected them personally.

Versta Research conducted an online survey on behalf of Wells Fargo from April 8 to 25 of 875 LGBT investors nationwide. Qualified respondents were non-students, ages 25 to 75, who were the primary or joint financial decision-maker in the household with household investable assets of at least $25,000.

Conversations About Money

The survey showed that LGBT couples had a strong focus on the financial benefits and risks of marriage, but many of these couples were not having conversations about money.

Just 37% of survey participants who were in same-sex partnerships said new marriage laws had prompted new conversations about money.

Twenty-one percent reported that they rarely or never talked about money, while 25% said they talked about money “a lot.”

And 38% admitted that discussions about money had led to friction in their relationships.

More important, researchers said, less than a third of recently married LGBT respondents had reviewed key components of their overall financial health for any changes or adjustments after getting married, including emergency savings, a written retirement savings or investment strategy, a plan or strategy to reduce debt and a careful budget to manage spending.

“So much has changed in the year since the DOMA rulings, and today same-sex couples can legally marry in 19 states and the District of Columbia,” Katherine Dean, managing director of wealth planning at Wells Fargo Private Bank, said in a statement.

“These changes, however, don’t appear to be spurring on conversations about financial issues like saving, investing, and preparing for retirement. When the laws change in a relatively short amount of time, however, there are typically more questions than answers. As an industry, it’s incumbent upon us to provide the kind of information LGBT couples need to make sound decisions so they can achieve their financial goals.”

Seeking Advice

With recent changes in laws affecting same-sex relationships, LGBT investors said they would value help on the following:

53%, wills and estate plans

35%, powers of attorney

35%, tax issues

33%, retirement planning, investing

24%, investing

23%, beneficiary designations

The survey found that needs varied among LGBT investors depending on their marital status.

Most of those surveyed preferred to work with professionals who understood the unique needs of the LGBT community.

Sixty-two percent of respondents felt the financial considerations and needs of same-sex couples were different from those of heterosexual couples, and only 49% said they would feel comfortable walking into their local bank and talking about financial issues that affect them as an LGBT person.

“Every legislative action that affects domestic partnerships has the potential to impact the financial situations and investment goals of LGBT investors,” Dean said.

“As financial issues become increasingly complex, LGBT investors see the merits of working with financial professionals specifically trained to understand the unique needs of LGBT couples.”

The Wells Fargo study showed these preferences:

74% preferred working with financial professionals who had other LGBT customers

52% preferred working with financial professionals who themselves were LGBT

LGBT investors gave mediocre grades to their primary banks or financial institutions with which they did the most business.

The average grade for being LGBT-friendly was a B; for being knowledgeable about new laws impacting LGBT customers, a C+; and for addressing the needs of LGBT customers, a C+.

Other studies have revealed that LGBT investors want to address specific issues with advisors, while being treated like other clients.

Commitment and Beyond

Sixty-one percent of LGBT investors surveyed said they wanted to be married now or sometime in the future.

But of this group, only 54% said commitment and love were the most important reasons to get married (vs. 80% in the U.S. overall).

Thirty-six percent cited financial and legal rights as the most important reasons to get married (compared with 8% in the U.S. overall).

LGBT investors believed these rights and benefits to be most important:

61%, health care decision-making rights

58%, insurance and health care coverage

56%, inheritance rights

Accredited Domestic Partnership Advisor Program

Wells Fargo, as well as other financial services firms, today uses the Accredited Domestic Partnership Advisor program to educate advisors about the unique needs and financial considerations of same-sex couples and domestic partners.

Financial advisors who earn this designation are equipped to work with domestic LGBT clients to develop a thoughtful approach to help identify and work toward their financial goals, the firm said.

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